TAXING ISSUES: IRS made up of people just like you and me

Most people think of the IRS as some cold, calculating entity to avoid. But they forget this organization is made up of individuals like you and me. They want to do their job properly and fairly while protecting the government’s interest.

This fact came home to me when a Mr. N called regarding a problem he was having with the IRS. Mr. N went into business back at the end of 2006 and enlisted the aid of a professional that was also foreign born. Not being familiar with all of the regulations, he entrusted Mr. CPA to prepare the weekly payroll and the filing of all the necessary reports. He went so far as to have his monthly bank statements and attendant forms sent to MR. CPA’s office. This turned out to be a big mistake as it appears later, that none of the payroll reports for 2007 and 2008 were being filed. Mr. N changed accountants in the 2009 and since then he is current on all of his filings.

When Mr. N entered into business, he had secured a 5-year loan with a balloon payment due in July 2012. He was in the process of renegotiating a new and more favorable mortgage when the IRS issued a lien for the 2007 and 2008 non-tax filing on his business property and equipment.

In order for the IRS to place a lien such as this, notices had to have been previously forwarded to the taxpayer after the tax assessments were made and not been paid. Mr. N stated that he was not aware of these bills as he had depended on his prior accountant and was reassured that everything was taken care of. Evidently the notices continued to go to the CPA’s office and were not forwarded to Mr. N.

There was a 30-day window to appeal this notice and since no response the lien was executed. Liens are a notice to all creditors that the IRS has a claim on the company’s assets and can remain on the property until the 10-year statute expires or if the tax bill is paid in full. As a result the bank was reluctant to act after learning of the lien. Mr. N had been working with the bank for a few months on lowering the interest rate on the loan and could not afford to lose this opportunity. If this was not worked out, he would lose everything that he had worked for. Everyone would lose, the bank, Mr. N and the IRS.

Discussions with a understanding Internal Revenue Officer seem to help settle the problem. The fact that Mr. N has been compliant for the past 4 years has been a great help in these talks. It was agreed that the bank could enter into the new closing with the IRS subordinating to the bank. Normally if the bank had canceled the old loan, and entered into a new agreement, they would fall behind the IRS in the creditor list and they would not have gone along with this arrangement. After agreeing to make a down payment on the taxes and entering into an installment agreement, it appears that it will work out after all.

The moral to this story is that as an owner, you have to become more aware of your responsibilities and do not give power away to someone else.

Observation: A former House Speaker once said, if you don’t drink, smoke or drive a car, you are a tax evader.

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